New Yorkers are sure of many things, but nothing ranks higher on their certainty scale than the superiority of their hometown. With New York’s world-class organizations and experiences in just about every facet of life, along with prestigious universities, a growing startup and tech community, and 73 Fortune 500 headquarters, it is hardly surprising that a new report from A.T. Kearney confirms the city’s global-leader status.
New York ranked first in the consulting firm’s 2019 Global Cities Index, which evaluates the performance of cities in areas including business activity, human capital, and cultural experiences.
But the Global Cities Outlook report, a companion to the Index that measures future potential, reveals that New York’s dominance may not always be a sure thing. The city lost ground in every area the Outlook report assesses, including personal well-being, innovation, and economics.
At the same time, emerging urban hubs — places like Dublin, Sydney, Taipei, and Abu Dhabi — are rapidly improving, moving up the Outlook ranks and threatening the long-standing leaders. For New York and other leading cities, the message is clear: Don’t get too comfortable.
A renewed strategic focus on areas that need improvement would not only benefit residents now but would also lay the groundwork for future business and investment opportunity.
A business powerhouse, for now
A.T. Kearney’s Global Cities Index evaluates five areas that are essential ingredients of the world’s best cities: political engagement, cultural experience, information exchange, human capital, and business activity.
New York scores highly in all of these areas but especially in business activity, the area in which the Big Apple has claimed the top ranking for the past five years. To measure business activity, the analysis takes into account factors such as the presence of Fortune 500 companies and global service firms, the flow of goods through a city, and capital-market activity.
Related, New York also comes in first for human capital — the talented people who help cities attract businesses. These two metrics often go hand in hand: Companies want a pipeline of high-quality workers to help grow their business, and excellent job opportunities draw people to particular cities.
Cracks in the armor?
So when it comes to vibrant business culture, New York is setting the curve for the rest of the world. The Global Cities Index shows as much.
The Global Cities Outlook, however, offers a different view of New York — one that may reveal some of the city’s potential weaknesses that could knock it from its perch as the world’s business center.
The Outlook report considers factors that tee cities up for future success, and the analysis digs into four specific areas: the personal well-being of city residents; local governance and how it affects the ease of doing business; economic metrics such as foreign direct investment; and innovation, which includes entrepreneurship and patent activity.
New York’s scores decreased in each of the four main Outlook areas, causing the city to drop outside the Outlook’s top 10. The reasons for the decline were twofold: In some areas of the index, New York experienced an actual dip in performance, while in other areas New York improved but not as fast as other cities. Neither bodes well for maintaining competitiveness.
For example, New York experienced a decline in its economics, fueled by a 30% dip in foreign direct investment — investment by foreign companies in New York businesses. Such investments help fuel business growth. The Big Apple was leading the Outlook in such investment in 2018, but it then dropped an astounding 25 positions as the extraordinary increases of previous years took a nosedive.
Additionally, the city isn’t keeping pace with other global urban hubs when it comes to the quality of healthcare and access to it. This affects the well-being of residents and affects their quality of life.
Other cities are also outpacing New York in the realms of infrastructure investment, patent activity, private investment, and the ease of doing business. All of these indicators suggest that while New York is a center of innovation and entrepreneurial activity today, the city may face real challenges from other places that are ramping up to attract investment, companies, and people.
New York’s performance in the Outlook mirrors that of many US cities, which are improving at a slower pace than cities in other regions around the world. But the fate of New York — or any city — isn’t set in stone.
The city has a long reputation for reinventing itself and for finding new areas of economic opportunity.
For instance, a decade ago, New York’s tech and startup scenes were relatively nascent. Thanks to a concerted effort to attract more tech talent, the city is now home to thousands of tech startups and second only to the Bay Area in venture-capital investment.
Local economies will continue to change. The secret to thriving amid the shifts is the ability to continually adapt.
For the Big Apple, a renewed focus on improving its human capital, while finding ways to enhance the economic and political environment, can help ensure that New Yorkers legitimately continue to sing the city’s praises.
Andrés Mendoza Peña is a partner in A.T. Kearney’s Strategy, Marketing and Sales Practice and is based in Chicago. He is involved in the development of the Global Cities Index, a key component of A.T. Kearney’s core set of global indices.
Nicole M. Dessibourg-Freer is a principal in A.T. Kearney’s Consumer Industries and Retail Practice and a co-author of the 2019 Global Cities Index. She is based in Chicago.